Will Bitcoin Core be anything more than a store of value like digital gold?
Ah, the years old argument of why Bitcoin is a store of value rather than an actual functioning currency. By now, if you’re a Bitcoin maximalist, you have stopped reading because you cannot see the writing on the wall. As a front line warrior in the battle vs. the legacy banking system it was quite revealing what could and will happen as the crypto revolution moves forward. The Lightning Network could moves us back to what Satoshi warned against as well as possibly being easily co-opted by centralized authorities.
First, let’s look at the current state of affairs. What makes legacy banking so problematic in the first place? For me it is a simple idea of accountability. Imagine if your Federal Government or even local government ran on an open ledger that is pubic. You as a citizen and tax payer would be able to see how your local or federal government spends your tax dollars. No more secret black budget projects estimated at over $50 billion dollars a year https://en.wikipedia.org/
The excuses can be made and some justified for these projects, however most “lawmakers” will focus on the homeless or border crisis and say “we need more money.” All of this could be solved by moving the way governments are held accountable by implementing some form of open ledger. Another factor is there will be no more payoffs to foreign leaders or nations states without the public knowledge. Not to mention foreign aid with cooked numbers. Here is just one example of a payoff to what some consider an “evil nation” https://www.
Now that we have established just one of the challenges with the legacy banking system, let’s tackle the idea of the Lightning Network as a substitute payment mechanism. The Lightning Network is an idea that came out over the foreseeable need to increase speed and lower transaction fees. As users of Bitcoin Core are now noticing, in periods of high traffic and congestion, there will be a need to move the transactions off the chain and have a layer 2 system in order to confirm micro-transactions in order to keep congestion off the main net application. Using a form of contract through a payment channel, users can send transactions back and forth then close the payment channel and it will be broadcast to the layer 1 main net. We will get into some of these problems later in the article.
When I was first into the idea of supplementing the legacy banking cartel and replacing it with a crypto currency for the people, I was totally on board with the Lightning Network. However, as my knowledge and experience grew I have since changed my outlook thanks to many conversations with peers when I was a support agent for a non-custodial wallet company. After working day after day and ticket after ticket with Bitcoin I saw things that are not fixable with the current solutions being presented. Not to mention the prospect of a DDOS attack bringing down the Lightning Network as it did it 2018, affecting more than 200 nodes. https://en.wikipedia.
Although the Lightning Network looks great on paper, faster transactions, lower fees etc. you run into a huge problem. Most users of crypto are not skilled enough nor know enough about the coins that they trade and use. With the advent of Lightning Network, how are you are going to have new users open and close payment channels easily? The user experience will drive many non skilled users away as they would like to “simply send my money.” Moreover, the main complaint that I received from customers at the time was that the “fees are too high.” Sure, Lightning Network will solve this problem and the day to day users will be thrilled. Cool, I was able to send my BTC to my friend for $0.03! YEAH Bitcoin is awesome. However what they do not realize is that the Lightning Network could have a catastrophic failure for purest like myself. As you move transactions off chain you run the risk of large entities gobbling up the Layer 2 network and thus creating a system that we were trying to escape in the first place. Centralized control of money.
Now, imagine if you will 10 years down the line that bitcoin is a widely accepted currency and you wish to travel abroad to North Korea to enjoy one of their amazing beaches. Currently, if you travel there or to Iran and you wish to use crypto as a form of payment there is no issue as there is no KYC (know your customer) to use crypto. However, what if in the future the US government, Goldman Sachs or even worse the Federal Reserve owns one of the nodes that rests on the Layer 2 network. Since you do not have access to the main chain you are now subject to the terms and conditions of the Layer 2 provider. If the Layer 2 provider has a form of KYC you will subjugating yourself to the terms and conditions of that Layer 2 provider or node operator with no access to the main net. Don’t try to fool yourself that this will not happen as I believe this is the true reason for the Lightning Network. To control who has access to the main net. You can extrapolate this further if add in the factors of credit ratings and social scores, which is where I believe this will head, then your escape from the legacy banking system has just become a back door into even more draconian control. We already see forms of KYC being implemented with Bitpay by providing a “receipt” with more meta data for your transaction via BIP70 (not needed by the way). Again, moving closer to legacy banking and not away.
Hopefully you are now starting the see the bigger picture when it comes to bitcoin and Lightning Network. The idea of moving transactions off chain opens up too many issues that can not really be solved without some form of big money stepping in to offer up the funding or “help” with the solution. We now see this in action with global members of the Elite class pitching in with Blockstream and their affiliation with the Bilderberg Group. Say what you will about this “drinking club,” however their power and influence in global finance can not be ignored or just labeled a “conspiracy theory”. This term has been used as a sort of shield for people that would rather dismiss the idea than look objectively at the information. https://www.reddit.com/r/btc/comments/47zfzt/blockstream_is_now_controlled_by_the_bilderberg/
Satoshi said it best when he stated…
“What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.”
Also, Satoshi never intended for the block size to remain at 1MB. https://www.reddit.com/r/btc/comments/75l38i/satoshi_explains_how_to_seamlessly_phase_in_a/
Nor did was he of the idea that everyone should run a node on a Raspberry Pi and should be left to specialized server farms. https://firstname.lastname@example.org/msg09964.html
To me, Lightning Network is trying to hid the fact of what it really will become, a trusted 3rd party processor, or even worse, an on-boarding platform to a global KYC system that can be used to halt or disrupt someone’s ability to conduct transactions on the network. How will they do this? They will simply make transactions too expensive to conduct on the main net and will force you to use the Layer 2 system. Let’s go back to my example above. The casual user claiming that “my fees are too high” what if there was an option that said, “You can use the lightning network if you just sign in and verify your identity and your transaction fee will be $0.03 as opposed to $25.00.” Most users will gladly give up their privacy to save $24.97 not knowing the difference just knowing the direct impact to their wallet. This idea will put us squarely back where the masters of money would like us to be. A controlled environment where the end user will need permissions to conduct commerce. Much like the credit system of the current banking system. You will need to participate in their structure rather than participating in a free exchange without the need for a third party.